Saturday, 5 February 2022

Modern concept of the project

Domestic design practice, as a rule, referred to the projects research, design and architectural and construction activities, since the project understood the set of documents, calculations, drawings necessary for the creation of any products or structures. The modern interpretation of the project goes beyond the above limits and broadly includes all activities, ranging from changing the image to the construction and operation of a nuclear power plant.

In foreign literature, the variety of definitions of the concept of "project" is explained primarily by various methodological approaches. Let's give a few of them.
The project is:

  • anything that is planned or thought, a great undertaking;
  • a certain enterprise with initially set goals, the achievement of which means the completion of the project (Set of knowledge on project management);
  • a separate enterprise with specific goals, which often include requirements for the time, cost and quality of the results achieved (English Association of Project Managers));
  • a certain task with defined source data and established results (goals) that determine the way it is solved (Explanatory Dictionary on Project Management).
  • The most important components of the interpretation of the project are a clear focus on the effectiveness of measures, the need to achieve them in a certain period of time in conditions of limited resource support.

Therefore, in the future, under the project, we will understand a one-time set of interrelated measures aimed at meeting a certain need by achieving specific results in the established material (resource) provision with clearly defined goals within a given period of time.

As goals of the project, economic and social results can be put forward, for example, increasing the production capabilities of the enterprise, creating or reconstructing market and social infrastructures, solving social and environmental problems, etc.

It is necessary to distinguish between the concepts of "project", "plan", "program", which are sometimes illegally identified.

A plan is the fixation of a system of goals, objectives and means that involve a directed change in the situation in the predicted state of the environment.

The program is a planned set of economic, social, research activities aimed at achieving general goals or implementing a certain direction of development.

An investment project is a package of investments and related activities that are characterized by:

  • a specific goal (goals), solving the problem of achieving results;
  • limited financial resources and the period from the beginning to the completion of the project;
  • the presence of certain external conditions (institutional, economic, legal, etc.);
  • interconnection of processes of investment of resources (monetary, financial, intellectual) and obtaining results.

Modern practice of treating entrepreneurial activity often identifies the functioning of the organization with project work, which is definitely an unacceptable mistake. The process of organization and project differ greatly from each other (see Table 1) according to such criteria as: type of problems being solved; nature of activity; the degree of intensity of resource use; the possibility of using the accumulated experience; the price of errors, etc.

The main features of the project

For the successful implementation of the project, it is necessary to highlight its main features that will allow managers to see the management objects and use the necessary tools for the implementation of the project. The main features of the project include:

  • 1. Quantitative measurement. This means that all costs and benefits from the project must be quantified, since the analyst gives an assessment of the project based on the figures. The claim that the project will "improve the well-being of the residents of the district" is an unfounded expression bordering on nonsense. However, the assumption that as a result of the project will be created "an additional 200 jobs, each of which will provide 1000 UAH of revenues in the form of tax and 20 000 UAH in the form of general national income", will give the analyst an opportunity to assess the feasibility of implementing this project.
  • 2. Time horizon of action. No project can exist without time constraints, in which there are two goals:
  • the first is to determine the period during which the success or failure of the project can be determined;
  • the second is that the assessment of the real value of financial costs and benefits is impossible without taking into account time constraints.
  • 3. Target orientation. The project is always aimed at achieving a specific goal, meeting a certain need. This direction assumes that there is a desirable measured result that can be achieved within a certain period of time. For the successful implementation of the project, it is necessary not only to determine it, but also to establish in a significant characterization, including the conditions (requirements and restrictions) of its functioning. The objectives of the project should be clearly formulated, measurable, the restrictions set, and the established requirements fulfilled.
  • 4. Life cycle. The project arises, functions and develops. There is a clear relationship and consistency between different activities behind the project. Each project, regardless of its complexity and the scope of actions necessary for its implementation, takes place in its development certain forms of state from design to implementation.
  • 5. System functioning of the project, elemental composition. There is a relationship between the elements of the project. However, the composition of the project does not always remain unchanged: some of its elements may appear or leave it.
  • 6. Existence in a certain external environment, the elements of which have a significant impact on the project. Therefore, the project must be analyzed taking into account the conditions of the environment in which it will be carried out.

When analyzing a project, you can also highlight the following additional features of the project:

  • resource constraints;
  • uniqueness, the latest tasks and problems;
  • complexity;
  • the need for legal and organizational support, etc.

The main signs of the project

Economic interdependence of projects Modern practice of management indicates

the need for simultaneous implementation of various projects, the results of which in one way or another affect each other. Depending on the mutual influence, the following types of projects are distinguished:

  • independent;
  • mutually exclusive;
  • conditional;
  • replacements;
  • synergistic.

Non-independent projects include those whose acceptance or rejection does not affect the profitability of other projects. An example here is the project of building a school and building a thermal power plant in a large industrial city. Since the users of the first project are students living in the area, they will benefit from attending a new school regardless of the functioning of the thermal power plant.

Mutually exclusive projects are those projects whose implementation is impractical when deciding on the implementation of another project, since the profitability of the first is reduced to zero level. As a rule, these projects have the same target installation, satisfy one need, so their simultaneous implementation is irrational. An example of mutually exclusive projects in thermal power is the construction of a nuclear and thermal power plant of the same power to produce the necessary thermal and electrical energy to meet the needs of the same region. Since it is possible to meet the needs for electricity by building one station, analysts choose the most attractive project. Of course, there is a physical possibility of building both power plants, but from an economic point of view, these projects exclude each other. Mutually exclusive projects reflect alternatives to achieving a single target installation.

Conditional are projects, the receipt of benefits from which is due to the adoption of another project. Such projects include the purchase and installation of treatment plants for the removal of pollutants emitted by coal-powered thermal power plants. The need to implement the project of construction of treatment plants depends entirely on a positive decision on the implementation of the said thermal power plant. However, it should be borne in mind that the conditionality of projects is not always symmetrical, since it is quite likely to implement a project for the construction of a coal-fired power plant without the construction of treatment plants.

Replacement is called project A, the profitability of which depends on the implementation of project B, since its profitability begins to decrease when accepting project B. This ratio can be both symmetrical and asymmetrical, and replacement can relate to both benefits and costs. For example, let's imagine that Project A involves the installation of high-performance roofs for the chimney, and project B is the use of coal slag for the production of new material for the road surface. In the absence of highly efficient scrapers, slag can be processed into a low-cost road surface component and sold at current market prices. However, the new system allows you to operate furnaces at a higher temperature, at which coal burns more fully and the slag acquires other chemical properties. In this case, the adoption of project A reduces the profitability of project B (costs increase), and the ratios here are asymmetrical. That is, although the acceptance or rejection of project A also changes the potential profitability of project B, the adoption or rejection of the latter in no way affects the profitability of project A. This is a replacement for costs.

An example of replacement projects based on benefits is the construction of a dam. Project A provides for the construction of a dam intended for the production of electricity, project B - adapted for irrigation. Both dams can be used for both purposes, but only one will be chosen. However, if they choose Project A, the efficiency of the dam for irrigation will become lower, and the water will cost the peasants more. Residents of the area, in turn, will be happy, receiving cheap electricity. On the other hand, if you stop at Project B, the peasants get cheap water, and the cost of electricity will increase. In this example, we are dealing with symmetrical substitution.

Synergistic projects are projects that increase each other's profitability, and the increase in profitability of one project can be based on both reducing costs and increasing benefits. An example of synergistic projects can be a project to build a road bridge across the river and build a dam on this river. In the event of a decision on the construction of the dam, it is possible to pave the road along it, which will significantly reduce costs, since a separate construction of the highway would require the construction of a bridge. However, if the decision to carry out the road was initially made, the projects would not be synergistic. Therefore, the synergy of these projects is asymmetrical.

Project analysis focuses only on independent and mutually exclusive projects. Any projects with other forms of interdependence should be converted either independent or translated into a set of mutually exclusive ones. Thus, inter compassing projects can be turned into a pair of mutually exclusive ones. For example, new chimney scrapers for a coal-fired power plant can be combined with the construction of the power plant itself to obtain two new alternatives: the first project is the construction of a coal-fired power plant with new scrapers, the second is the construction of a coal-fired power plant with the usual chimney cleaning technology. Replacement and synergistic projects can be converted into independent inclusion in the cash flow of the estimate of "blur" of profitability (replacement projects) or increase of profitability (synergistic projects).

Of course, such procedures require additional work from analysts to collect and analyze incoming information, to identify the cause of some phenomena by others. At the same time, the accuracy of such amendments allows you to make reasoned decisions about the economic feasibility of implementing projects.

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